Intro: Market expectations remain cautious as policymakers weigh growth support against fiscal discipline and global uncertainty

New Delhi

Finance Minister Nirmala Sitharaman is all set to present the Union Budget for the financial year 2026-27 on February 1. It is expected to balance growth needs with fiscal discipline amid global uncertainty.

Market experts believe that the upcoming budget will place a strong emphasis on emerging priority sectors that can drive long-term growth and strategic resilience.

A recent report said the budget will give more attention to defence, critical minerals, power, electronics, infrastructure and affordable housing. It noted that policymakers must support growth while keeping government spending under control in a difficult global climate. Motilal Oswal Financial Services said even small and focused steps could lift market confidence.

Investors are not expecting big announcements, as the finance minister is dealing with many economic and political challenges. Because of this, the base of expectations is low, leaving room for positive surprises. The report said the role of the budget has narrowed over time due to several steps taken outside the budget. As a result, stock markets will look for targeted measures that support key sectors and improve investor mood.

The government has stayed firm on fiscal discipline, with the deficit falling sharply from pandemic highs. The fiscal deficit has reduced from 9.2 per cent during Covid to an estimated 4.4 per cent in FY26. The report expects this cautious approach to broadly continue in the coming financial year. However, it does not fully rule out a small and practical rise in spending if needed.

Such steps may find market approval if funds are channelled into productive capital projects. Experts say consumption support will stay limited, as earlier tax relief is still taking effect. Hence, the 2026 budget is likely to stress capital spending on defence, infrastructure, power and strategic sectors, seen as crucial for security, jobs, stability and long-term growth.